USA TODAY Co., Inc. (TDAY) September 8, 2026 Conference Transcript

Just a high level strategy question. Like you said, I mean, at one level, like your strategy is very clear, but there were a lot of things that happened on that last earnings call where you were talking about serving machines and stuff like that. And so I thought maybe just to start us off, just a high level, simple strategy question. What is your firm's strategy? How has it evolved? Where are we now? And what might change?

Yeah. And trying to keep it simple and In short, I think the way I would answer that is we have one of the biggest content creator forces in the country. We create content every day that's relevant to consumers. We're kind of in the news space, although we've branched out into entertainment, sports, games, and things like that. But we have a national play and a local play, which makes us a bit unique compared to most media companies. But we're a content creator, and what's really the underlying strategy is create content that's relevant and unique, valuable to consumers, and to build an audience on our digital platform at scale. And that's really the underlying strategy. What is changing really rapidly that impacts Q2 both positively and negatively is the search landscape's changing dramatically from the old search to new AI search, and that's impacted where consumers, when they're doing search, what platform they stay on versus moving across around the open web, and that impacts us more in a negative way than a positive way. But then on the other hand, AI is creating opportunities for us to take the data we have on consumers, make it into intelligence that we can then use to create a more personalized and engaging experience for consumers, which we think in the long run will lead to better revenue opportunities for all consumers on our platform. So for us, the strategy is still create content that's unique but yet relevant, bring audience to the platform, leverage that data. Once they're on the platform, we get signals, turn that signal into intelligence, actionable intelligence, and then have an opportunity to monetize that consumer on our platform. And our digital revenue strategy is across five really diversified revenue streams. We're not all in on any one. We're really focused on five. That's digital subscription revenue, digital advertising revenue, e-commerce revenue, digital marketing services, and then licensing and syndication of our content. And across those five categories, we're looking to be able to grow ARPU per consumer on the platform, as well as expand overall margins of the business as we especially enter licensing deals. So definitely it's complicated and we could go into a ton of detail, but that's the underlying strategy. Grow audience at scale, leverage, take that data, make it into actionable intelligence through technology today that makes a more personalized experience for every consumer on our platform.

Okay. And when you say the search ecosystem is evolving rapidly, that is something that transcends just the AI overview or whatever, right? This is just constant changes that are being made by Google all the time and then punctuated by this recent AI overview change or?

Yeah, correct. Yeah, correct. Deprioritizing search, removing things from search. Google plays a lot of games. Right.

They just want to keep you in their walled garden.

Okay.

All right. So, Tricia, this is a question more for you. So, I think the North Star for your stock is same store revenues. That seems to be the thing that investors are most focused on. And the declines were pretty sharp, almost 8% back in the first quarter of 25. And then almost every quarter uninterrupted, it just got better and better and better and better until we got to minus, I'll call it minus 1.8, call it minus 2 in the first quarter of 26. But then we sort of retrench back down to minus six in the second quarter. And the stock sort of reacted to that, I think. And so my question is pretty simple. What happened in 2Q that caused this uninterrupted improvement to sort of get interrupted for one quarter? And do you think investors should take that as indicative of future growth? Or is that just a blip on a multi-quarter, multi-year improvement trajectory?

Yeah, I think that's a great question. And I think the strategy that Mike just outlined really leads us to what we said we would do this year, and that is meaningful improvement in our same store revenue. And we've done that through the first half of the year. And we came into the year saying that there would be quarterly variability in our business. And I think it's really important to separate the quarterly variability that we alluded to when we came into the year signaling and the underlying fundamentals of the business, which we think are moving in the right direction and are what are going to give us that sustained improvement in same store revenue. And I agree. I think that that's the metric that investors look at the most and certainly what we look at. And so the AI content licensing business, which is growing, is still a very nascent business. there's a lot of quarterly variability in how that revenue is recognized. And we signaled that as we came into the year. It was particularly strong in Q1, not as strong in Q2, although it still had 20% year-over-year growth in the quarter. But when you look at the second quarter, you look at our digital-only subscription business. That grew nicely. A second consecutive quarter of year-over-year growth, we drew new highs in ARPU. Our content licensing business continued to grow again at double digits. Even in a quarter where the same store revenue didn't show the same kind of improvement in the first quarter, we still grew free cash flow year over year. We posted a solid net income. So I think it shows that we're able to control all of the variables, even as the top line varies quarter to quarter. But I also think that the second quarter is not indicative of where we think we'll be. Certainly the quarter where we started to see the most impact from search on our traffic. But we're doing quite a bit under, you know, in the foundation to bring that traffic to us in different sources. We expect that to improve in the second half of the year. So overall, a really strong first half of the year. And we think we'll continue to improve those trends as you've seen over the past several quarters.

Jason, I would just add to that. As Tricia is saying, I think with a transformation like we're going through from a legacy print business to a digital business, there are two steps forward, one step back, and there are fits and stops, and then there are things changing in the technology world and in the search world, and they impact our business. And so one of the things we really talk to investors about a lot, and we manage the business this way internally is on an annualized basis, are we continuing to make progress? Because there are going to be some fluctuations quarter to quarter, and sometimes the stock market quarter to quarter is more like a casino, and it's not really the right way to look at our business. And if you looked at the LTM, for example, at the end of the second quarter, while we had a a step back from q1 to q2 our ltm at the end of uh of q2 was still improved from the year before so i think the year before in q2 our same store was down seven so our ltm now with a down six and it's a little bit better so we are we are we really do encourage that kind of long that long-term view of on an annual basis are we continuing to make progress and if you look back over the last three or four years, we continue to make progress on same-store sales towards that inflection point, and then at the same time, expanding margins and growing free cash flow.

That inflection point meaning flatter growth?

Yes, that's correct. All right.

So LTM. Trisha, can you go back to one thing you said? What was it that grew 20% in the first quarter? Was that all digital or that was digital? Yeah, our digital other grew 20% year over year in the second quarter okay in the second quarter now maybe it's very hard for me to unpack sort of digital other but i sort of assumed that the the did that the weakness that we saw in the second quarter was really just a function of uh smaller ai licensing revenue but maybe that's not right maybe it's more around some of the search things that you were bringing up can we sort of is that Is it sort of an AI issue or it's more digital advertising dollars related to the search changes or both?

Yeah, well, I think if you're just simply comparing Q1 to Q2, down two versus down six, it is both. We had more licensing revenue in the first quarter that was tied to a specific set of content that somebody bought from us. It didn't repeat in Q2, so there was a difference there. And then we saw some changes in Google search that impacted us more in Q2 than it had in previous quarters. And so there's a combination of those two things.

Okay, that's great. And then on the AI side, can you just remind us, Mike, what AI deals you've done so far and which, just in terms of names? But and then are there any left or should investors think of, you know, it's just about sort of getting more juice out of the lemons that where we already have contracts?

Yeah, no, there's more or less. So we've done deals so far with Meta, with Microsoft, Microsoft, with Amazon. But so we will we do think we'll get more juice out of those lemons, those three. But there are there are a lot more deals to do. There's just some of the names you could think of are Apple and Anthropic, OpenAI, Gronk, Grok, whatever Musk is. And then there are the social media platforms that as each day goes by and you have so many hallucinations and fake content out there, our content being a trusted source of content. There's more that's being sought after more by the social media platforms who want trusted content on their platform. And so them licensing or paying us essentially think about it like a licensing fee to produce more of our content in onto those platforms in addition to our own, which is part of our growth strategy anyways, but that opens up more paths for deals as well. So we do think there's one or two more deals to come this year. We did say that on the second quarter earnings call. So I think you'll see that in the next couple of months, but then there are more deals to do out there as well.

Okay. And then when, when I think investors always struggle with these AI deals, cause it's like, I think we've sort of learned some of this is, you know, you've always said it's lumpy, but it's very hard for us. Is it like fixed or variable or some combination of the two without getting into the specifics? Can you just qualitatively describe how these deals are typically struck.

Yeah. And I say lumpy partially because there's a lot of reasons why it's lumpy, but partially because this ecosystem is so new and it's just evolving. And our partners on the other side who have the AI business are really still trying to figure out their business model. And so compensating us for the content as they figure out their business model, I think gets easier. And I still think there's a big disconnect between what we perceive our content's worth and what they perceive it's worth. And I think that that dynamic, it continues to work in our favor each day because there's so much fake news out there and so much hallucination out there that trusted content is becoming more and more valuable. But as their business models evolve and as the desire to have trusted content evolves, I think that these deals will become less lumpy and they'll have a more, it'll be easier to understand how they work and to lay out how they work. Right now, every deal we've done has been really different. Some have been more pay on performance. Some have been, we want to buy archived content. Some are, we want to buy real time content for the next two years. Um, so each, each deal has been structured a little bit differently. Okay. And so I, that's why I think, I think this ecosystem still has to evolve for the deals to become more consistent.

Yep. Okay. That's super helpful. So outside of AI, I'm going to turn it back over to you, Trish. Um, the beyond AI and within other revenues, you've, you've, um, got a handful of these so digital subscriptions um they grew year over year but when i sort of look at the long-term numbers like digital subscriptions it's sort of flattish with like a lot of volatility like the subs go up and then the subs go down and the arpu is down and then the arpu is up a lot like it's very hard to get a ton of modeling conviction as you're sitting there trying to go out and prognosticate the future right but you guys sound very optimistic about where digital subscriptions are going. So maybe just talk a little bit about both the past in terms of the quantity and the price, you know, moving up and down, and then what we should expect going forward and why you're so optimistic about digital subscription.

Yeah, absolutely. So our digital subscription business has been growing this year, year over year. You pointed that out in the second quarter, we saw good growth year over year. That's been driven off of our ARPU. So our ARPU continues to hit record highs, up over 30% year-over-year in Q2, consistently double-digit growth year-over-year. And we think we have continued headroom on our pricing. We think we can continue to improve ARPU. But what you've seen is that our volumes have been pretty stable to declining. And what we saw in the second quarter that has us really optimistic is the fact that we're starting to see the underlying metrics of our volumes give us the indication that we're at the point where volumes will start to return to growth. We've been incredibly disciplined in our pricing strategy over the past year. And that means we've let go of high churn, low lifetime value customers that brought in a lot of volume, but didn't bring in a lot of revenue. We've taken that off of our platform. That's helped us increase our ARPU, but it's also given us a much more sustainable and predictable base of subscriptions and subscribers. And from that, we can model the future more predictably than we've been able to in the past. And so as you look at Q2 and you see things like our churn metrics are improving, our start to stop ratio is improving, our retention, our engagement is improving. And so long term, growth really does need to come from both levers. It needs to come from ARPU, and it needs to come from volume. You're seeing that ARPU growth now. I think you'll see that continue, but I think you'll only see digital subscription revenue growth be more substantial as we bring back volume growth and ARPU growth.

So more stable going forward?

Yeah, we did a lot of work over the past year. it was painful to take those high churning, like I said, low lifetime value consumers off of our platform. They were difficult to model, but we've done the work so that we have quality subscriptions left in our portfolio.

And when you guys say start to stop, that's just gross ad as a start and someone that churns as a stop? Correct. Okay. And you're looking at that ratio and it's getting better and better as you model. Okay, that's great. So digital ads down, I think it was 9% in the second quarter. Is this just all circled back to the search changes or was there something else going on in the digital ad market beyond the search changes?

Yeah, I think there were three things that happened in the second quarter that each had about equal weight. So the second quarter was the first quarter where we really saw the change in consumer behavior, search behavior, impacting our digital advertising revenue. We also saw one of our programmatic partners being removed from one of the platforms that we use. And then we did see a change in one of our vendors, a Google algorithm change, which impacted one of our vendors, which then flowed through sponsored links onto our platform. I would say all of those had about equal weight in the quarter. The thing that we're most excited about is that we have the ability to bring consumers onto our platforms in different ways. We've been intentionally stepping away from search for many quarters now. I think you've heard us talking for well over a year about lessening our reliance on Google search as a funnel for traffic onto our platform. And the work that we've been doing, whether it's around social or newsletters are still a very valuable channel for us in acquiring customers. As those start to scale and stack up, we have the ability to change that digital revenue trend in the back half the year. I think you also have heard us talk a lot about the work we're doing around technology. The signals on our platform are known users. And as that grows across our platform, our advertising CPMs start to grow as well. So I don't think that the trend that we saw in the second quarter is indicative of where we'll be in the back half of the year.

Great, Trisha. Thank you. So, Mike, I'm going to shift it over to you. During the second quarter, you brought up Palantir for the first time. At least I've missed this if you mentioned it in prior calls. What are you doing with Palantir?

If you can sort of dumb it down to yeah explain for a layman what does that what does that mean how is it going to help they have a software that they've written called foundry you know over the last 20 years and uh we're essentially renting that so what what we do and the simplest way to think about it is we take the data or the signals we get from consumers on our platform and we have so much history of that not only do we create new signals every day new data every day but we got a history so we have tons of data and what we do is is rent palantir software to turn those signals into actionable intelligence that's really what we're doing so with every single consumer on our platform we can serve them a more personalized experience these are the the this is the content we need to serve that consumer here's the e-commerce link we need to embed into that content here's the subscription offer we should deliver at this time at this price to that consumer this is the type of advertising that will work with this consumer and so it's essentially taking the data or all those signals we have in all the history but also the new stuff we're creating and really turning it into actionable intelligence for us to do that ourselves it would take years to build your the software, and they've done it. And so the data is ours. The output's ours. The last mile of delivery of that intelligence is on our platforms. It's really all of our stuff. We're renting their software and their future deployed engineers to help us. And so I'm really excited about the opportunity and what might take us years to do, I think we can do in months with them.

So let's say that this succeeds. What ends up happening? We just see digital revenues get better as the advertising gets better.

Exactly. Across all categories, commerce, subscription, and advertising, I think across all three. So I think you would look at, instead of looking at just a number per subscriber, you look at a number per consumer on the platform. Right. Because there's a lot of people that will never subscribe right so our overall revenue per consumer on the platform should grow meaningfully from two dollars where it is today to to a much larger number in the future and that's two dollars per dow is that what you're measuring or two dollars per mao or when you say a consumer on your platform yeah per per year in in revenue if you if you say We have 100 million, 150 million consumers on the platform every single month. You know, we do $2 to $3 per year in revenue. Because I'm taking DMS revenue out, so you can't look at our total revenue. Just revenue generated on the platform. From the consumers. So if we do $2 or $3 and we can get that to $6, it's a double of digital revenue. And so I'm really, we're really excited. We just started, so we don't have enough information to really say this is the pace we think this should grow at. But we're hopeful in the next couple quarters we have enough real information to be able to say, here's how you model it. Here's how you should think about it.

Have you turned on all of these at the same time? Or are you piloting one where it's like you're just focused on ads or just focused on sponsorship or something?

Yeah, we're actually just turning them on but doing it in a couple markets.

Oh, interesting. So all of them are on in a few markets. In a couple markets. As sort of a beta test. When will you share with the street how well that's going or not going?

No, our hope is that we're actually going to see revenue improvement in the fourth quarter from this test. So hopefully by the time we get to the fourth quarter, we're talking about what we saw from an improvement standpoint from Palantir. That's great. So not that far off. Have you shared how many markets you've turned on?

I don't know if we have, but it's two.

I don't know if we're breaking news here.

And so the idea in these two test markets is just sort of get some learnings, lessons learned, and then take those learnings and then expand. That's great. So, Tricia, I'm going to go back to something that Mike sort of caught me off guard during the 2Q earnings when he started talking about we serve both machines and humans. I haven't heard any other publishers say this. So can you just talk a little bit about that? because I, not that I disagree with you, I've just never heard it expressed that way.

Yeah, the reality is, is that half of the traffic on the internet now is machines. It is bots. And so we're aware that we have to serve both humans and machines with our content. The good news is you don't have to change the type of content that you're producing. And you don't have to approach your business from a content perspective differently for humans or for machines. What you do have to make sure you're doing is that your content is in a format that is beneficial for both machines and for humans. So we're leaning into things like subject matter expertise is going to be important. The speed that your site loads at is going to be important. Content that is actionable. All of those are things that are important for human readers, but that's also things that are important for our machine readers. So machines may get there first, but our ultimate goal is always going to be to reach that human reader so what you have to do is you have to take the work that we've done to optimize your content for search engine optimization right that becomes a lot less important you have to pivot now to make sure that your content and your format is optimized for answer engines or generative engines and you also have to make sure that your experience, whether it's for humans or for machines, is in a format that's recognizable and repeatable. And that's the work that we're doing to make sure that we're providing that type of simple, easy to digest, recognizable content to machines. But interestingly enough, that's also what our human readers want, right? And so as we are working to lessen our reliance on search, creating that recognizable destination for human readers is also going to be important in our audience growth going forward. So it is interesting. We know that our content is serving two different audiences, but it's really about the format that we have to be focused on and not changing the content that we're producing.

I think everyone in the audience would agree that machine I didn't know if people know it's half I didn't know it's half of all traffic but everyone agrees machines are out there to a greater extent but how is that different than than the AI licensing I mean I thought we all thought that you were taking your corpus of information and then licensing this to AI and then AI would do something with it which would be machine traffic and then the human would come in and do something and get the answer from the AI well you're what you're describing here is a totally separate initiative from the AI licensing revenue, right? Where you're just taking your corpus of information and making it more accessible to a machine. That's where I get a little confused.

Yeah, I think there's an overlap there, right? So you need to create your content in a way that ultimately AI licensing platforms, that it's most effective for AI licensing platforms. And that is important. And we want to make sure that only, you know, we are blocking AI licensing platforms who are not, don't have current licensing agreements with us. But once they do have licensing agreements with us, you know, they process large amounts of data. It's important that your content and your data be in a structure that is helpful and efficient for them. But it's not just AI licensing platforms. We have millions of bots every day, every month, trying to scrape content from our platform. And sometimes you want those bots to scrape content from your platform. We have advertisers who want to have bots scraping against our platform because it gives exposure to that advertiser and to their ads on our platform. And so making sure that when in simplistic terms, good bots have access to content or those that we have agreements with, that it's in a format that is efficient for them.

That's super helpful. Jason, I think what's really interesting about that is that it creates a bigger AI licensing opportunity, too, in terms of the pay-to-play models, because we've learned a lot in our partnership with Microsoft. And part of that partnership is they've created a marketplace for all their other business companies to come and leverage AI in the marketplace. And so our content's in that marketplace and we've learned what performs and what doesn't perform. And the human storing telling nature of our content we produce for humans doesn't work in the marketplace where it's mostly other businesses or other machines coming in to scrape that, to utilize that content. So for us to create even more revenue on the AI licensing side, we need to have the human content human storytelling content reformatted into something that's all data in fact not storytelling that then is consumed in in a larger fashion in ai marketplaces and so it's an interesting way to think about how we grow our ai licensing opportunity just by serving a different machine versus a human super interesting i'm going to shift to the the google litigation, if that's okay with you, Mike.

So there's two cases, right? We've got the DOJ that has sued Google, and then you have a separate parallel lawsuit. And I just want to focus on the first one, the Google one. You've told us that the next step now that Google has been found to have a monopoly in the supply side and in the exchange, that we're just waiting for the judge to hand down the remedies, right? My question is, is that when those remedies come out, If I was an investor and I knew that Google said they're already going to appeal this DOJ ruling, what do I do as a USA Today investor? It seemed to me if I know there's an appeal, there's not a major read across. But maybe I'm wrong.

Well, the remedies are Google's been found guilty of antitrust violations in the DOJ case. That's a fact. That's done. They found guilty. we filed summary judgment saying they've already been found guilty so for our claims that are the same as the deal what the doj won we shouldn't have to prove those we should talk damages we won that summary judgment of course so that's done yeah in the doj case the remedies are what does google have to do because they were found guilty yes and that those remedies are about to come out they there's a memo it's under lock and key for 14 days while there's redactions done but we should know we we did hear from our lawyers it's 106 pages and so we should know in the next couple weeks what's a lot of remedies yeah it's but it's but the remedies are behavioral not break the break the company up right but we should know in the next couple weeks what those are and google may want to appeal what the actual remedies are but that doesn't have anything to do with the guilt the guilt of the case like they were found guilty of these and for these infractions and so that applies to our case as well so the behavior the remedies are just what does google have to do as a result of being found guilty sure just like in our case they've they've now been found guilty of these things so in our case it's okay what's that mean damages wise of course so but my my question is if if they're found guilty and google's already said that they're going to appeal that finding, then aren't the remedies sort of at some level moot or a

misunderstanding?

No, the remedies go into effect, regardless of whether they appeal or not. Google would then have to apply to have the remedies stayed. And I'm not an attorney, but they would have to argue that it would be so detrimental to their business to have these in place while they're appealing. So the assumption would be that the remedies are in place unless they get those remedies stayed, which would be a separate action from the appeal.

Okay. So investors, whenever these remedies come out, investors can sort of take those to the bank. And I guess the most bearish interpretation is those remedies might be temporary if Google's challenging the guilty appeal in the first place, but they're going to go into effect. That's the point.

That's my understanding.

Okay. Unless they can get a stay, which we think is highly unlikely. Understood. And then do you guys have a preference for behavioral or structural?

I mean, I guess it was bad i don't know you tell me i mean since we're not doing structural changes since they've already said that yeah the structural changes in our view um would have taken a long time to put in place okay to break that business up and sell it you could be looking at two or three years i see and so the behavioral stuff to us can be done essentially in a matter of a week or two or overnight so to us the the behavioral is a better path because it's more instantaneous to our business.

Okay. That's great. Anyone have any questions for the team at USA Today?

All right. Well, this is great. Thank you so much for the time.

Yeah, absolutely.

Thanks everyone.